Commercial Property - Leaseholders

A recent decision of the Lands Tribunal is bad news for individuals wishing to purchase their freehold… but good news for those with residential investment portfolios.

The Leasehold Reform Act, which gives residential lease holders the right to extend their leases or purchase the freehold, involves a complicated valuation to determine the property’s worth at the time the lease is due to expire. This valuation uses a set rate of interest – known as a deferment rate – to calculate future values and it is this interest rate that has just been set by the Lands Tribunal.

Following a landmark case involving Lord Cadogan, who owns swathes of Chelsea and is worth a reputed £1.6 billion, the Tribunal has determined that a deferment rate for leasehold flats should be 5% and leasehold houses 4.75%. It also determined that these values should be generally applicable unless there is very good reason to change them.

For property owners outside of London this change is particularly significant and could result in an increase in the value of a property portfolio by as much as 50%.

For further information about leaseholders’ rights, lease extensions, freehold enfranchisement and the Leasehold Reform Act, please contact Jean Howe at the Luton office.